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00:00My name is Arthur Laffer. I'm an economist. I live in Nashville Tennessee. And we're here in Washington D.C. at the W hotel I was in the OMB I was the chief economist at the OMB then and I found my friends up there in the OMB really boring. So I always came down and hung out with the 0 0 people. Bill Bradley was in that group and no FTSE Todd Whitman and Jim Jim Leach attorney says Yeah insurance and it was just a fun group of people . Laughter and Dick Cheney and I would have dinner from time to time or lunch from time to time or just have meetings in the White House from time to time. In 1974 he came to the Hotel Washington to the two continents restaurant that's where we sat and talked about tax policy an art drew the Laffer Curve. I invited you to an esky who was a writer for The Wall Street Journal at the time he passed on but he kept all the records of this stuff in an article. Much later it was called taxes revenues and the Laffer curve. He recounted this dinner. Let's say it was the four of us and that is the dinner we're talking about today. During that time what we were trying to do obviously was manage this transition from the Nixon administration to the Ford administration and there's never been anything like. And the country was faced with some serious economic problems. And what was coming up through the system was not what I felt represented the direction the country should go. And it was in large measure coming I think it's safe to say from speechwriters as opposed to economists we were spending a lot of time on the economic program. Oh my gosh we were still doing the veil at Christmas time. I remember that we spent a lot of time in ski clothes in the living room of the house that Ford was renting the bass house. Gerry Ford was proposing a tax increase of 5 percent tax surcharge. And so I was talking with Don back then who was chief of staff and and Dick who was deputy chief as I said look guys you're not going to get 5 percent more revenue with a 5 percent tax surcharge you may get 4 percent more revenue you may get 3. You might also lose wrap because the tax base will shrink. I drew that little curve on a napkin to illustrate that just one of those events that stuck out in my mind because it's not every day you see somebody without a sharpie and markup you know the cloth napkin at the dinner table . He was that way. And a lot of napkins. My recollection is we were in the restaurant downstairs sitting at a table about my this and you drew the curve on the napkin I was struck by it when you did. I never got the napkin but I have the napkin that was put this in the Smithsonian was to Don Rumsfeld from Arthur Levitt. And why if I did that would don not have picked it up . I don't want that trash. I had to deal with this but I do it all these mathematical models of the facts of taxes which you know if you know the math it works out pretty nicely but it doesn't have the sort of the bite the flavor of the real world . So I would develop all of these anecdotes to try to illustrate the economics one of which was the Laffer Curve which if you tax people at 100 percent no one will work because they don't get any incentive to work. And the government will collect no revenues if you tax people at 0 percent never will work like mad but you're not collecting any revenues. Well basically the curve showed that with a tax rate of zero you were going to collect zero taxes with a tax rate of 100 percent you're going to collect zero revenue if you shut down the economy. It had the power of simplicity. It was a truth that could be expressed in in a paragraph. We each turned to each other and said Arthur Laffer is absolutely brilliant. I make my memories now. I'm 82 years old. I could be wrong . Here's a question for you. When did Reagan first see the Laffer curve. Well Reagan. I used to have like with you Don. I used to have lunch with Reagan during the 76 to 80 period. He'd come and just the two of us and he'd come in with all these paper stacks with paper clips and ask me questions about it. Marty Anderson wrote in the book Revolution he remembered the day he saw it and understood it. I just saw the president. I don't remember that. To be honest with you I remember doing that with the present but politics as that is where the rubber hits the road. I'm not held responsible for public policy. I'm this guy sitting at the dinner and I go home at night. They actually are held accountable but they understood what I said. They understood the context in which it was done and then they had to take those ideas and blend them with the politics in the real world. It clearly had an impact on the way at least on our side of the aisle people began to think about economic policy and tax policy and revenues and growth. So it was for me it was a significant moment in my own development of being put in those terms. It was so simple and so compelling that the traditional liberal view was contested with a traditional conservative view of it was contested. It's not Republican it's not Democrat it's not liberal it's not conservative it's a left wing it's not right wing it's economics OK vertical axis horizontal axis tax revenues vertical is the tax rate case you forgot the curve goes out like this you may remember a belt it's a belt . Here's one hundred percent right here. This is where it's June when we need it. June should be here though you know what really is said because he did do. He made all of this stuff really happened. It was amazing. This time I'm going to make this to my friend Dick Cheney . You got the first one and you gave it away Don Pardon me. Save me now you're saved. This time I'm going to get them to go to the Cheney museum. All right. Old friends are the best friends and there's no question about that. We've all three been friends for many many decades now. Something I suppose exceeding 40 years for decades. These are my two favorite people as you can tell. As long as we agreed with him he liked Don Rumsfeld and I've been close friends for 40 years . He fundamentally changed my life and got me off the academic track and into politics and government RTS. I say no more interesting personalities around and so have lunch and somebody else paid for it . What does it say. That's classified .

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